NEWTON, Mass.--Hospitality Properties Trust (NYSE: HPT) today
announced its results of operations for the quarter and year ended
December 31, 2004, as follows:
(amounts in thousands, except per
share amounts)
Quarter Ended Year Ended
December 31, December 31,
--------------------------------------
2004 2003 2004 2003
------- -------- -------- --------
Net income $35,856 $144,132 $127,091 $238,213
Net income available for common
shareholders $33,942 $140,437 $114,624 $223,433
Funds from operations ("FFO") $57,375 $ 61,807 $233,864 $233,075
Common distributions declared $48,386 $ 45,063 $193,523 $180,242
Per common share amounts:
Net income available for
common shareholders $ 0.51 $ 2.24 $ 1.72 $ 3.57
Funds from operations ("FFO") $ 0.85 $ 0.99 $ 3.52 $ 3.72
Common distributions declared $ 0.72 $ 0.72 $ 2.88 $ 2.88
Weighted average common
shares outstanding 67,203 62,587 66,503 62,576
The fourth quarter 2003 operating results include non-recurring gains from lease terminations of $107.5 million.
The 2004 operating results set forth above reflect the first year
that 12 hotels owned by HPT were operated as Prime Hotels. These 12
Prime Hotels are operated under one management contract together with 24
AmeriSuites Hotels (i.e., for a total of 36 hotels under one contract).
The hotels included in this contract are the only combination of hotels
which HPT owns which reported a decline in RevPAR, or revenue per
available room, during the 2004 fourth quarter and full year. During
2004, the operator of these 36 hotels, Prime Hospitality Corporation,
was sold to Blackstone Group. Shortly after year end 2004, Blackstone
Group transferred operating responsibility for these 36 hotels to Hyatt
Corporation. Pursuant to guarantees given by Prime Hospitality and
honored by Blackstone and Hyatt, the minimum returns due to HPT have
continued to be timely paid. However, as a result of the 2004 RevPAR
declines at the Prime hotels, the income and FFO which HPT realized from
these hotels is less than HPT would have realized without such
declines. HPT is currently having discussions with Hyatt Corporation
concerning plans for these operations.
Hospitality Properties Trust is a real estate investment trust, or
REIT, which owns 285 hotels located in 38 states. HPT is headquartered
in Newton, Massachusetts.
WARNING REGARDING FORWARD LOOKING STATEMENTS
THIS PRESS RELEASE INCLUDES FORWARD LOOKING STATEMENTS WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND THE
FEDERAL SECURITIES LAWS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON
HPT'S PRESENT BELIEFS AND EXPECTATIONS, BUT THEY MAY NOT OCCUR. FOR
EXAMPLE, THIS PRESS RELEASE STATES THAT HPT IS CURRENTLY HAVING
DISCUSSIONS WITH HYATT CORPORATION CONCERNING PLANS FOR THE FUTURE
OPERATIONS OF THE 24 AMERISUITES HOTELS AND 12 PRIME HOTELS OWNED BY
HPT. ONE POSSIBLE IMPLICATION OF THIS STATEMENT IS THAT THE REVPAR
DECLINE EXPERIENCED AT THESE 36 HOTELS DURING 2004 MAY CEASE OR REVERSE.
IN FACT, HOWEVER, HYATT MAY BE UNWILLING OR UNABLE TO MAKE CHANGES IN
THESE OPERATIONS WHICH IMPROVE THEIR REVPAR AND THE PROFITS REALIZED BY
HPT AT THESE HOTELS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE
UPON THESE FORWARD LOOKING STATEMENTS.
Hospitality Properties Trust
CONSOLIDATED STATEMENT OF INCOME AND FUNDS FROM OPERATIONS
(amounts in thousands, except per share data)
Quarter Ended Year Ended
December 31, December 31,
--------------------------------------
2004 2003 2004 2003
-------- --------- -------- ---------
Revenues:
Hotel operating revenues
(1) $119,342 $ 68,801 $498,122 $ 209,299
Minimum rent 30,343 55,874 125,669 216,125
Percentage rent 2,803 1,128 2,803 1,128
FF&E reserve income (2) 4,147 4,203 18,390 18,335
Interest income 199 63 384 398
Gain on lease terminations
(3) -- 107,516 -- 107,516
-------- --------- -------- ---------
Total revenues 156,834 237,585 645,368 552,801
-------- --------- -------- ---------
Expenses:
Hotel operating expenses
(1) (4) 74,602 48,695 333,818 145,863
Interest (including
amortization of deferred
financing costs of $686,
$683, $2,744 and $2,536,
respectively) 12,618 12,626 50,393 44,536
Depreciation and
amortization 28,725 27,732 114,883 104,807
General and administrative 5,033 4,400 19,386 16,800
Loss on early
extinguishment of debt (5) -- -- -- 2,582
-------- --------- -------- ---------
Total expenses 120,978 93,453 518,480 314,588
-------- --------- -------- ---------
Income before gain on sale of
real estate 35,856 144,132 126,888 238,213
Gain on sale of real estate -- -- 203 --
-------- --------- -------- ---------
Net income 35,856 144,132 127,091 238,213
Preferred distributions (1,914) (3,695) (9,674) (14,780)
Excess of liquidation preference
over carrying value of
preferred shares (6) -- -- (2,793) --
-------- --------- -------- ---------
Net income available for common
shareholders $ 33,942 $140,437 $114,624 $ 223,433
======== ========= ======== =========
----------------------------------------------------------------------
Calculation of FFO (7):
Net income available for common
shareholders $33,942 $140,437 $114,624 $ 223,433
Add: FF&E deposits not in net
income (2) 421 2,004 1,767 9,769
Depreciation and
amortization 28,725 27,732 114,883 104,807
Excess of liquidation
preference over carrying
value of preferred shares
(6) -- -- 2,793 --
Loss on early extinguishment
of debt (5) -- -- -- 2,582
Less:Gain on sale of real estate -- -- (203) --
Gain on lease terminations -- (107,516) -- (107,516)
Deferred percentage rent (8) (2,167) (850) -- --
Deferred hotel operating
income (9) (3,546) -- -- --
------- --------- -------- ---------
Funds from operations ("FFO") $57,375 $ 61,807 $233,864 $ 233,075
======= ========= ======== =========
----------------------------------------------------------------------
Weighted average common shares
outstanding 67,203 62,587 66,503 62,576
======= ========= ======== =========
Per common share amounts:
Net income available for
common shareholders $ 0.51 $ 2.24 $ 1.72 $ 3.57
FFO (7) $ 0.85 $ 0.99 $ 3.52 $ 3.72
Common distributions
declared $ 0.72 $ 0.72 $ 2.88 $ 2.88
----------------------------------------------------------------------
See Notes on page 4.
Hospitality Properties Trust
NOTES TO CONSOLIDATED STATEMENT OF INCOME AND FUNDS FROM OPERATIONS
(amounts in thousands, except per share data)
(1) As of December 31, 2004, each of our 285 hotels was included in
one of eight combinations of hotels which are either leased to one of
our taxable REIT subsidiaries and managed by an independent hotel
operating company, or are leased to a third party. At December 31, 2004,
we had 177 managed hotels and 108 leased hotels. Our consolidated
statement of income includes hotel operating revenues and expenses of
managed hotels, and only rental income from our leased hotels. The pro
forma operating results for all 177 of our managed hotels assuming
acquisition of the hotels and commencement of the management agreements
as of January 1, 2003, are as follows (includes amounts for periods
prior to our ownership of some of these hotels and for periods when some
of these hotels were leased by us to third parties different than the
current operators):
Quarter Ended Year Ended
December 31, December 31,
----------------- -------------------
2004 2003 2004 2003
------ ------ ------ ------
Hotel operating revenues $119,342 $117,689 $510,124 $504,714
Hotel operating expenses 87,363 89,822 351,708 352,226
(2) Various percentages of total sales at most of our hotels are
escrowed as reserves for future renovations or refurbishment, or
FF&E Reserve escrows. We own the FF&E Reserve escrows for all
the hotels leased to our taxable REIT subsidiary and for most of the
hotels leased to third parties. We have a security and remainder
interest in the FF&E Reserve escrows for the remaining hotels leased
to third parties. When we own the FF&E Reserve escrows at hotels
leased to third parties we report payments into the escrow as additional
rent. When we have a security and remainder interest in the FF&E
Reserve escrows, deposits are not included in revenue but are included
in FFO. We do not report the amounts which are escrowed as FF&E
reserves for our managed hotels as FF&E reserve income in our
consolidated statement of income.
(3) We recorded gains on lease termination in the 2003 fourth quarter
as a result of the termination of our two leases with Wyndham
International, Inc. and our lease with Candlewood Hotel Company, Inc.
(4) Certain of our managed hotels had net operating results that were
less than the minimum returns due to us by $6,501 and $7,032 in the
fourth quarter of 2004 and 2003, respectively, and $10,595 and $6,922
during the fiscal year 2004 and 2003, respectively. These amounts are
included in our consolidated statement of income as a net reduction to
hotel operating expenses in each period because the minimum returns were
funded by our managers.
(5) The loss on the early extinguishment of debt resulted from the
write off of unamortized deferred financing costs of that debt.
(6) On April 12, 2004, we redeemed all of our outstanding 9 1/2%
Series A Preferred Shares at their liquidation preference of $25 per
share, plus accumulated and unpaid dividends. We deducted the $2,793
excess of the liquidation preference of the redeemed shares over their
carrying amount from net income in determining net income available to
common shareholders in the calculation of earnings per share.
(7) We compute FFO as shown. Our calculation of FFO differs from the
NAREIT definition because we include FF&E deposits not included in
net income (see note 2), deferred percentage rent (see note 8) and
deferred hotel operating income (see note 9) and exclude the excess of
liquidation preference over carrying value of redeemed preferred shares
(see note 6), the loss on early extinguishment of debt not settled in
cash (see note 5) and gain on lease terminations (see note 3). We
consider FFO to be an appropriate measure of performance for a REIT,
along with net income and cash flow from operating, investing and
financing activities. We believe that FFO provides useful information to
investors because by excluding the effects of certain historical costs,
such as depreciation expense and losses on early extinguishment of
debt, it may facilitate comparison of current operating performance
among REITs. FFO does not represent cash generated by operating
activities in accordance with GAAP and should not be considered an
alternative to net income or cash flow from operating activities as a
measure of financial performance or liquidity. FFO is among the
important factors considered by our board of trustees when determining
the amount of distributions to shareholders. Other important factors
include, but are not limited to, requirements to maintain our status as a
REIT, limitations in our revolving bank credit facility and public debt
covenants, the availability of debt and equity capital to us and our
expectation of our future performance.
(8) In calculating net income we recognize percentage rental income
received for the first, second and third quarters in the fourth quarter
when all contingencies are met and the income is earned. Although we
defer recognition of this revenue for purposes of calculating net
income, we include these amounts in the calculation of FFO during the
first three quarters of the year.
(9) Our rights to share in the operating results of our managed
hotels in excess of the minimum returns due to us are generally
determined based upon annual calculations. For fiscal year 2004 our
share of these operating results was $1,397 and we recognized this
income in the fourth quarter of 2004 when all contingencies were met and
the income was earned. Although we deferred recognition of this income
for purposes of calculating net income during the first three quarters
of 2004, the calculation of FFO for these periods included our share of
operating results in excess of minimum returns of $3,546. Our share of
these operating results declined by $2,149 during the fourth quarter of
2004 as the operating results of certain of our managed hotels were less
than the minimum returns due to us for the quarter.
Hospitality Properties Trust
Key Balance Sheet Data
----------------------
(in thousands)
Dec. 31, Dec. 31,
2004 2003
---------- ----------
Cash $ 15,894 $ 6,428
========== ==========
Restricted cash (FF&E Reserve escrow) $ 38,511 $ 55,755
========== ==========
Real Estate, at cost $3,180,990 $3,179,507
========== ==========
Debt, net of discounts
Floating rate - Credit Facility, due 2005 $ 72,000 $ 201,000
Fixed rate - 7.00% Senior Notes, due 2008 149,914 149,888
Fixed rate - 9.125% Senior Notes, due 2010 49,966 49,960
Fixed rate - 8.3% Mortgage payable, due
2011 3,826 3,881
Fixed rate - 6.85% Senior Notes, due 2012 124,330 124,240
Fixed rate - 6.75% Senior Notes, due 2013 297,469 297,157
---------- ----------
Total Debt $ 697,505 $ 826,126
========== ==========
Equity
9.5% Series A Preferred (none and 3,000,000
shares outstanding) $ -- $ 72,207
8.875% Series B Preferred (3,450,000 shares
outstanding) 83,306 83,306
Common (67,203,228 and 62,587,079 shares
outstanding) 1,602,567 1,490,015
---------- ----------
Total Equity $1,685,873 $1,645,528
========== ==========
======================================================================
Additional Data
(in thousands except percentages)
----------------------------------------------------------------------
Dec. 31, Dec. 31,
2004 2003
----------- ----------
Leverage Ratios
---------------
Total Debt / Total Assets 25.9% 29.9%
Total Debt / Real Estate, at cost 21.9% 26.0%
Total Debt / Total Book Capitalization 29.3% 33.4%
Variable Rate Debt / Total Book Capitalization 3.0% 8.1%
Year Ended Year Ended
Dec. 31, Dec. 31,
2004 2003
---------- ----------
Cash Flow Data
--------------
Cash flow provided by (used in):
Operating activities $ 223,119 $ 219,405
Investing activities $ (2,462) $ (371,610)
Financing activities $ (211,191) $ 151,296
Hospitality Properties Trust
Hotel Revenue Data
------------------
The following tables summarize the hotel operating statistics reported
to us by our third party tenants and managers for our 285 hotels.
Quarter Ended
No. of December 31,
Lease/ No. of Rooms/ ------------------------
Management Agreement Hotels Suites 2004(1) 2003(1) Change
-------------------- ------- ------- ------- -------- -------
ADR
---
Host (no. 1) 53 7,610 $101.24 $ 94.76 6.8%
Host (no. 2) 18 2,178 96.60 92.99 3.9%
Marriott 35 5,382 93.69 88.63 5.7%
Barcelo Crestline 19 2,756 94.94 87.45 8.6%
InterContinental (no. 1) (2)(3) 30 3,694 88.73 87.78 1.1%
InterContinental (no. 2) (2)(3) 76 9,220 55.77 53.80 3.7%
Prime (3)(4) 36 5,250 70.70 70.38 0.5%
Homestead 18 2,399 51.16 47.08 8.7%
------------- ------------------------
Total/Average 285 38,489 $ 81.84 $ 77.65 5.4%
OCCUPANCY
---------
Host (no. 1) 53 7,610 68.4% 63.1% 5.3 pt
Host (no. 2) 18 2,178 77.8% 73.9% 3.9 pt
Marriott 35 5,382 73.3% 70.9% 2.4 pt
Barcelo Crestline 19 2,756 69.6% 68.5% 1.1 pt
InterContinental (no. 1) (2)(3) 30 3,694 69.8% 66.9% 2.9 pt
InterContinental (no. 2) (2)(3) 76 9,220 70.9% 68.6% 2.3 pt
Prime (3)(4) 36 5,250 54.3% 60.5% -6.2 pt
Homestead 18 2,399 75.3% 73.6% 1.7 pt
------------- ------------------------
Total/Average 285 38,489 69.1% 67.2% 1.9 pt
RevPAR
------
Host (no. 1) 53 7,610 $ 69.25 $ 59.79 15.8%
Host (no. 2) 18 2,178 75.15 68.72 9.4%
Marriott 35 5,382 68.67 62.84 9.3%
Barcelo Crestline 19 2,756 66.08 59.90 10.3%
InterContinental (no. 1) (2)(3) 30 3,694 61.93 58.72 5.5%
InterContinental (no. 2) (2)(3) 76 9,220 39.54 36.91 7.1%
Prime (3)(4) 36 5,250 38.39 42.58 -9.8%
Homestead 18 2,399 38.52 34.65 11.2%
------------- ------------------------
Total/Average 285 38,489 $ 56.55 $ 52.18 8.4%
Year Ended
No. of December 31,
Lease/ No. of Rooms/ ------------------------
Management Agreement Hotels Suites 2004(1) 2003(1) Change
-------------------- ------- ------- ------- -------- -------
ADR
---
Host (no. 1) 53 7,610 $100.38 $ 95.51 5.1%
Host (no. 2) 18 2,178 94.86 93.32 1.7%
Marriott 35 5,382 94.71 91.19 3.9%
Barcelo Crestline 19 2,756 92.26 88.44 4.3%
InterContinental (no. 1) (2)(3) 30 3,694 89.65 89.99 -0.4%
InterContinental (no. 2) (2)(3) 76 9,220 55.97 54.77 2.2%
Prime (3)(4) 36 5,250 73.49 70.13 4.8%
Homestead 18 2,399 50.14 47.72 5.1%
------------- ------------------------
Total/Average 285 38,489 $ 80.42 $ 77.20 4.2%
OCCUPANCY
---------
Host (no. 1) 53 7,610 71.3% 64.0% 7.3 pt
Host (no. 2) 18 2,178 79.3% 76.6% 2.7 pt
Marriott 35 5,382 76.3% 73.9% 2.4 pt
Barcelo Crestline 19 2,756 73.8% 69.0% 4.8 pt
InterContinental (no. 1) (2)(3) 30 3,694 75.3% 74.2% 1.1 pt
InterContinental (no. 2) (2)(3) 76 9,220 71.2% 72.0% -0.8 pt
Prime (3)(4) 36 5,250 61.5% 67.9% -6.4 pt
Homestead 18 2,399 79.2% 75.9% 3.3 pt
------------- ------- ----------------
Total/Average 285 38,489 72.1% 70.6% 1.5 pt
RevPAR
------
Host (no. 1) 53 7,610 $ 71.57 $ 61.13 17.1%
Host (no. 2) 18 2,178 75.22 71.48 5.2%
Marriott 35 5,382 72.26 67.39 7.2%
Barcelo Crestline 19 2,756 68.09 61.02 11.6%
InterContinental (no. 1) (2)(3) 30 3,694 67.51 66.77 1.1%
InterContinental (no. 2) (2)(3) 76 9,220 39.85 39.43 1.1%
Prime (3)(4) 36 5,250 45.20 47.62 -5.1%
Homestead 18 2,399 39.71 36.22 9.6%
------------- ------- ---------------
Total/Average 285 38,489 $ 57.98 $ 54.50 6.4%
(1) Includes data for the calendar periods indicated, except for our Courtyard by Marriott®, Residence Inn by Marriott®, Marriott Hotels Resorts and Suites®, TownePlace Suites by Marriott®, and SpringHill Suites by Marriott® branded hotels, which include data for comparable fiscal periods.
(2) 2003 includes data for periods prior to our ownership of some hotels.
(3) 2003 includes data for periods some hotels were operated by a different manager than in 2004.
(4) Prime transferred its management agreement to a subsidiary of Hyatt Corporation in January 2005.
Rent/Return Coverage Data(1)
---------------------------
Quarter ended Year ended Year ended
Lease/Management Agreement 12/31/04 12/31/04 12/31/03
--------------------------- ------------- ------------ ------------
Host (no. 1) 1.2x 1.3x 1.0x
Host (no. 2) 1.1x 1.0x 1.0x
Marriott 0.8x 0.9x 0.8x
Barcelo Crestline 0.8x 0.9x 0.7x
InterContinental (no. 1) 0.5x 0.8x 0.7x
InterContinental (no. 2) 0.8x 0.8x 0.8x
Prime (2) 0.7x 1.1x 1.0x
Homestead 1.2x 1.2x 1.1x
-------------- ------------ ------------
Range (all agreements) 0.5x-1.2x 0.8x-1.3x 0.7x-1.1x
(1) We define coverage as combined total hotel sales minus all
expenses which are not subordinated to minimum payments to us and the
required FF&E Reserve contributions (which data is provided to us by
our tenants or operators), divided by the minimum rent or fixed amount
return payments due to us. For some combinations, amounts have been
calculated using data for periods prior to our ownership of some hotels
and prior to commencement of operating agreements.
(2) Prime transferred its management agreement to a subsidiary of Hyatt Corporation in January 2005.
Hospitality Properties Trust
Timothy A. Bonang
Manager of Investor Relations
John G. Murray, President
or
Mark L. Kleifges, CFO
617-964-8389
www.hptreit.com